Wednesday, December 4, 2013

The President's Speach on the Economy: a Review

Let's critique the President's speech and see what it tells
us.

"Nevertheless, during the post-World War II years, the
economic ground felt stable and secure for most Americans, and the future
looked brighter than the past. "-
Yes, he's got the right idea.We had
good policies and programs that supported the middle class and a prosperous future
for all.

"But starting in the late ‘70s, this social compact
began to unravel." - Actually, it started in the early '70s, but no one
noticed.

“Technology made it easier for companies to do more with
less, eliminating certain job occupations. “ – NO.This is always true, but not a cause of long
term unemployment or dwindling prospects.A common mistake made today.

“A more competitive world lets companies ship jobs
anywhere. “- NO.Again, a common misconception.The world has always been competitive, and
globalized.It was changing trade
policies that allowed US corporations to ship jobs overseas, at least for now.

“And as good manufacturing jobs automated or headed
offshore, workers lost their leverage, jobs paid less and offered fewer
benefits.”- Yep.

“As values of community broke down,…”- He hits it on the head here.We are no longer “One Nation”.We have become “us” and “them”.

“As a trickle-down ideology became more prominent, taxes
were slashed for the wealthiest, while investments in things that make us all
richer, like schools and infrastructure, were allowed to wither. And for
a certain period of time, we could ignore this weakening economic foundation,
in part because more families were relying on two earners as women entered the workforce.
We took on more debt financed by a juiced-up housing market. But when the
music stopped, and the crisis hit, millions of families were stripped of
whatever cushion they had left.”- So
true.Investment in future productivity
makes us richer.

“Since 1979, when I graduated from high school, our
productivity is up by more than 90 percent, but the income of the typical
family has increased by less than eight percent.” – So true, so sad.

“The combined trends of increased inequality and decreasing
mobility pose a fundamental threat to the American Dream, our way of life, and
what we stand for around the globe. “- Yes. This is what being
American is all about.The current challenges
being brought onto America are an existential threat.

“…and together with lax regulation, may contribute to risky
speculative bubbles.” – The lax regulations, rather than the concentration of
wealth itself, are the chief culprit.Bring back Glass-Steagall.

“The opportunity gap in America is now as much about class
as it is about race, and that gap is growing.”- Yes, this is class issue and always has been.

“Second, we need to dispel the myth that the goals of
growing the economy and reducing inequality are necessarily in conflict, when
they should actually work in concert. We know from our history that our
economy grows best from the middle out, when growth is more widely
shared. And we know that beyond a certain level of inequality, growth
actually slows altogether.”-
Absolutely.Spot on.

“Third, we need to set aside the belief that government
cannot do anything about reducing inequality.” – Again, right on.

“To begin with, we have to continue to relentlessly push a
growth agenda.” – Good, but the devil is in the details as they say.

” And that means simplifying our corporate tax code in a way
that closes wasteful loopholes and ends incentives to ship jobs overseas.” –
Yes to ending the incentives to move jobs overseas, but too much emphasis on
corporate taxes which have little impact on hiring.This is just a cave in to special interests,
and ignores the problems of trade imbalances and more appropriate mechanisms to
remedy this such as tariffs.

“It means a trade agenda that grows exports and works for
the middle class. It means streamlining regulations that are outdated or
unnecessary or too costly.”- yes, but
the problem is not regulations!!It’s
the trade imbalance caused by a lack of protective measures like tariffs which
are traditionally used by all advanced countries.

Overall, the President ignores the trade deficit and does
not tackle financial regulation that is needed for any meaningful recovery.

“Step two is making sure we empower more Americans with the
skills and education they need to compete in a highly competitive global
economy.”- Good, we all need education
to get good jobs.

“so we’ve helped more students go to college with grants and
loans that go farther than before. We’ve made it more practical to repay
those loans. And today, more students are graduating from college than
ever before.” – Umm, I’m not sure what he’s talking about as grants are almost
non-existent for the middle class and the costs of college are more burdensome
than ever.Also, more college graduates aren’t
necessarily a good thing.We need the
proper education for kids as not everyone should go to college; sometimes
vocational training is what is more useful.

“So we should offer our people the best technical education
in the world. That’s why we’ve worked to connect local businesses with
community colleges, so that workers young and old can earn the new skills that
earn them more money.” – As long as he’s not referring to ‘STEM’ because we
have plenty of computer people.We need
more broad based skills for a wide variety of jobs.

“the third part of this middle-class economics is empowering
our workers. It’s time to ensure our collective bargaining laws function
as they’re supposed to so unions have a level playing field to organize for a
better deal for workers and better wages for the middle class.” – Good, this is
how it’s supposed to work.Unions have
lost most of the clout that they had acquired by the 1950’s.They need to organize and act more vigorously
than ever.

“And that’s why it’s well past the time to raise a minimum
wage that in real terms right now is below where it was when Harry Truman was
in office. “- Yes, the free market
needs a bottom so people don’t drop right through.

“Number four, as I alluded to earlier, we still need
targeted programs for the communities and workers that have been hit hardest by
economic change and the Great Recession… Promise Zones, urban and rural
communities where we’re going to support local efforts focused on a national
goal -- and that is a child’s course in life should not be determined by the
zip code he’s born in, but by the strength of his work ethic and the scope of
his dreams. “- This is misguided
and does not help the middle class which he so touted through the speech.This will not help the structural problems of
the economy or financial system.

“So we’re going to have to do more to encourage private
savings and shore up the promise of Social Security for future
generations. And remember, these are promises we make to one
another. We don’t do it to replace the free market, but we do it to
reduce risk in our society by giving people the ability to take a chance and
catch them if they fall.” – Yes.The
name says it all: Social Security.Only
the Federal government has the ability to guarantee income in spite of the
vagaries of life that befall all of us.

“…SNAP…unemployment insurance… These programs are almost
always temporary means for hardworking people to stay afloat while they try to
find a new job or go into school to retrain themselves for the jobs that are
out there, or sometimes just to cope with a bout of bad luck. “- Yes, the idea is that the normal state is
for people to have good, well-paying jobs, that the government supplies support
when those good jobs become unavailable for a time.

“That’s why we fought for the Affordable Care Act --
(applause) -- because 14,000 Americans lost their health insurance every single
day, and even more died each year because they didn’t have health insurance at
all. We did it because millions of families who thought they had coverage
were driven into bankruptcy by out-of-pocket costs that they didn't realize
would be there. Tens of millions of our fellow citizens couldn’t get any
coverage at all. And Dr. King once said, "Of all the forms of
inequality, injustice in health care is the most shocking and inhumane.” – Yes,
the American people, acting through their government, has a responsibility to
see that all Americans get needed health care.Is the ACA it, probably not, but it might be better than what existed
before.

The President has some idea of the forces acting against the
middle class, but does not seem to comprehend the fundamental causes of
these.Those are: the lack of balanced
trade, the lack of trade protections for industries which provide high value
added, high wage jobs and the economic foundation of our country, the
regulation of finance which separated depository institutions from investment
and speculation, the control over the money creation process, and the
restoration of a trade settlement system like Bretton Woods.All the good intentions and laudable goals
will do nothing if these fundamental issues are not addressed.

About Me

I have a Ph.D. in physics and work in technology research and development. I've done work on muonic atoms, plastic solar cells, Hydrogen storage for fuel cell cars, and wireless lamps. I've worked on a variety of systems for space systems, defense and cyber security. Besides the technical world I have a strong interest in politics, economics, and finance and how they affect the future of the US.